Microsoft has been ordered by the Internal Revenue Service (IRS) to pay $28.9 billion in additional tax, plus interest and penalties, covering the period from 2004 to 2013.
The IRS’s claim is based on its assertion that Microsoft shifted profits to low-tax jurisdictions during this period, using a common tax avoidance practice known as “transfer pricing.” Transfer pricing is a legal practice that allows companies to allocate profits and losses between their subsidiaries in different countries.
However, the IRS alleges that Microsoft abused transfer pricing by shifting too much of its profits to subsidiaries in countries with lower tax rates.
What Microsoft has to say
Microsoft has denied any wrongdoing and has vowed to contest the IRS’s claim. In a statement, the company said that it “complied with all applicable tax laws and regulations” and that it “disagrees with the IRS’s findings.” “We disagree with the proposed adjustments and will vigorously contest the NOPAs through the IRS’s administrative appeals office and, if necessary, judicial proceedings. We do not expect a final resolution of these issues in the next 12 months,” said Microsoft in a filing with the SEC.
The IRS’s claim against Microsoft comes at a time when multinational corporations are facing increasing scrutiny over their tax practices. In recent years, a number of large tech companies, including Google, Amazon, and Apple, have been accused of shifting profits to low-tax jurisdictions to avoid paying taxes in the countries where they generate their revenue.
The IRS’s claim against Microsoft is also significant because it could have a major impact on the company’s bottom line. If Microsoft is forced to pay the full amount of taxes and penalties that the IRS is seeking, it would be a major blow to the company’s finances.
The outcome of the tax dispute between Microsoft and the IRS is still uncertain. However, the case is likely to drag on for several years, as both sides could end up making their case in court. In the meantime, the case is a reminder of the growing challenges that multinational corporations face in complying with international tax laws.
The IRS’s claim is based on its assertion that Microsoft shifted profits to low-tax jurisdictions during this period, using a common tax avoidance practice known as “transfer pricing.” Transfer pricing is a legal practice that allows companies to allocate profits and losses between their subsidiaries in different countries.
However, the IRS alleges that Microsoft abused transfer pricing by shifting too much of its profits to subsidiaries in countries with lower tax rates.
What Microsoft has to say
Microsoft has denied any wrongdoing and has vowed to contest the IRS’s claim. In a statement, the company said that it “complied with all applicable tax laws and regulations” and that it “disagrees with the IRS’s findings.” “We disagree with the proposed adjustments and will vigorously contest the NOPAs through the IRS’s administrative appeals office and, if necessary, judicial proceedings. We do not expect a final resolution of these issues in the next 12 months,” said Microsoft in a filing with the SEC.
The IRS’s claim against Microsoft comes at a time when multinational corporations are facing increasing scrutiny over their tax practices. In recent years, a number of large tech companies, including Google, Amazon, and Apple, have been accused of shifting profits to low-tax jurisdictions to avoid paying taxes in the countries where they generate their revenue.
The IRS’s claim against Microsoft is also significant because it could have a major impact on the company’s bottom line. If Microsoft is forced to pay the full amount of taxes and penalties that the IRS is seeking, it would be a major blow to the company’s finances.
The outcome of the tax dispute between Microsoft and the IRS is still uncertain. However, the case is likely to drag on for several years, as both sides could end up making their case in court. In the meantime, the case is a reminder of the growing challenges that multinational corporations face in complying with international tax laws.